Existing Home Sales Mutes Lower GDP Growth

Slower Q3 Growth News Muted by Home Sales

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Existing Home Sales Mutes Lower GDP Growth

Third quarter (Q3) GDP growth was revised significantly lower in its final check up. The news surprised the great consensus of economists, who were looking for just a modest reduction. Still, due to the age of the data, and good news emanating from more recent real estate data, stocks moved higher Tuesday.

Real Gross Domestic Product (GDP) growth was revised to a 2.2% rate, down from the 2.8% rate determined at last report (3.5% initially). Economists surveyed by Bloomberg expected growth to be only slightly cut in this last and final take, to 2.7%. The decrease primarily reflected downward revisions to nonresidential fixed investment, private inventory investment, and personal consumption expenditures.

Existing Home Sales spiked in November, benefiting from the First-Time Homebuyer Tax Credit. Existing Home Sales are tallied upon transaction closing, so the rush to earn the tax incentive before its November end deadline drove a spike in September Housing Starts and October and November Home Sales. Of course, the tax credit has been expanded and extended since.

Existing Home Sales reached an annual pace of 6.54 million in November, up from 6.09 million in October. The pace is 44.1% greater than that of a year ago, and is the highest since February 2007. Existing Home Inventory likely enthused investors most of all, with the store of homes for sale dropping to 6.5 months, versus the 7.0 month total in October. The Dow Jones Industrials increased about a half percentage point through late afternoon trading. Housing stocks did well, with Toll Brothers up 4.6%, Hovnanian (NYSE: HOV) up 1.2%, DR Horton (NYSE: DHI) up 3.4% and Beazer Homes (NYSE: BZH) up 1.3%.

Editor's Note: Article should also interest investors in Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), PNC Financial (NYSE: PNC) and JP Morgan (NYSE: JPM).


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